Key Performance Indicators. How much do they really matter to business results?
KPIs mean absolutely everything to business performance. In fact, key performance indicator establishment is the same as business forecasting in many regards.
Having the right Key Performance Indicators in place is just as important as having the right skills and attitudes in the right jobs in terms of your future business growth.
Every aspect of your business is managed by establishing key performance indicators and KPI measures. This is how you stay on track to meeting business goals.
Main areas where KPI management falls below expectation are:
- Employers fail to be clear with employees where their expectations lie.
- KPI interpretation differs to intention.
- Inadequate measurements are put in place.
- Reasonable, well thought out time-lines for completion are not included.
- Performance levels are unreasonable, or made not possible due to resource limitations.
- Agreement between employer and employee on the goals and timeframes are not achieved
Discussing performance goals with employees is really the key to the achievement of them.
As the owner of the business, your job is to inspire a sense of purpose in the team, inspire commitment to the goals themselves, the conviction that goals – including stretch goals – can and will be achieved, then to remove the obstacles that fall in the path of goal achievement.
Enabling an open and transparent communication channel between managers and employees and very regular updates on steps toward key milestones and goals achieved is crucial to goal achievement.
This is the very basis of Agile Planning Systems – short sprints in succession toward an overall team goal. Each team member works on specific outcomes, achieving bigger overall goals much more quickly.
It does not matter what type of business you run, considering key fundamental actions required for future success and putting goal focused action plans in place, you are infinitely more likely to achieve business growth.
So, what are the most important areas for KPI focus?
There are many important factors, but each department in your organisation will have a specific KPI to either manage costs or drive revenue.
- Establishing cost variation goals within an allowable range or percentage of revenue
- Establishing revenue targets and putting sales & marketing plans in place to achieve revenue goalsOptimising operations efficiency and outputs to specific standards
- Reduction of operational waste to specified maximums
- Managing inventory within specified minimum and maximum levels
- Managing purchasing costs to specified levels
- Managing despatch processes within specified error levels and time frames.
Regular, open dialogue about progress toward achieving KPI goals and any obstacles impeding progress will open communication channels across your managers and employees – leading to increased transparency across functions and roles in the business.